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Amendments to the Regulations for Application of the VAT Act

Amendments to the Regulations for Application

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The second issue of Tax News for 2017 presents a summary of the most significant changes in the Regulation for Application of the Value Added Tax Act (RAVATA) promulgated in the State Gazette, issue No. 24, entering into force effective 21 March 2017.

The amendments are in relation to the Act to Amend and Supplement the VAT Act in force as of 1 January 2017 about which we informed you with the edition of Tax News from 15 December 2016.

Amendments related to the proportional input VAT deduction

It is stipulated that the criterion which guarantees the most appropriate calculation of the amount of the input VAT to be deducted proportionately is any reasonable time-based or quantity-based criterion or a combination of both and which takes into account the use of the respective asset for business purposes and its specifics.

Specific rules for proportional input VAT deduction in cases of initial VAT registration and re-registration have been defined.

It is specifically clarified how the received invoices must be reported in the VAT purchase ledger for the purposes of the proportional input VAT deduction.

Amendments related to the adjustments of the initially deducted input VAT

The requisites of the protocols for one-off adjustment (e.g. in case of wastage or shortage) of the input VAT deducted have been specified.

New protocols (i) for annual adjustment of the proportional input VAT deduction and (ii) for adjustment of the input VAT deducted in the event of cancelled supplies have been introduced.

Amendments related to the calculation of the pro-rata coefficient

It is clarified that, for the purposes of calculating the pro-rata coefficient, the following supplies should not be taken into account (i) supplies of long-term assets used for the purposes of the independent economic activity of the tax payer and (ii) incidental real estate and financial transactions.

It is set out that, for the purpose of the one-off and the annual input VAT adjustments, the pro-rata coefficient will be calculated on the basis of the usage of the respective asset, rather than on the basis of the total pro-rata coefficient for the respective year.

Amendments related to the VAT exemption of supplies involving international transport

Changes have been made in the documents and evidence necessary to apply the zero VAT rate to supplies related to international maritime transport.

The conditions under which vessels are considered to be used in high seas are explicitly listed.

The cases in which the use of the vessels is not subject to the zero VAT rate are specified.

A declaration has to be signed on behalf of the ship owner and of the aviation operator certifying the use of a vessel in high seas, respectively the use of the aircraft chiefly on international routes.

Other amendments

Annex 6 does not have to be submitted together with the VAT declaration with a VAT result for reimbursement after the completion of an offsetting procedure. The last month for submission of Annex 6 under the old regime is March 2017.

The period for exercising the right of input VAT deduction by a successor in a merger is increased from three to twelve months. It is specified that the list of available assets may also be submitted on technical data storage.

Amendments have been introduced to reflect the changes in the VAT Act with regard to the special VAT regime for taxation of single tourist services.

It is clarified that, in the case of a free-of-charge supply of services with goods which do not qualify as non-current assets under the new VAT Act, the tax base is not to be reduced by the normal wear and tear of these goods accumulated for periods prior to 31 December 2016 if, until 31 December 2016, no free-of-charge supplies of services were performed with these goods.

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